Internal Strategy, Outsourced IT

Continued

Oracle's Lye emphasizes that keeping in-house staff free from distraction is a key advantage of Oracle On Demand. "The internal resources are already deployed on other projects," he says. "If a company wants to add applications and do it internally, it either has to wait or it has to hire more people." The outsourcing strategy, by contrast, makes big IT changes possible.

"We see outsourcing as a strategic and competitive advantage," Davis says. "We don't have to allocate human resources or technology resources to running an infrastructure for Oracle HR and Oracle Financials, so we have the flexibility to redirect these resources to more value-added work, and we can scale that capability up and down as needs require. So it's a huge competitive advantage for us." Oracle's Schwarz concurs, noting, "Our customers are looking to us as their trusted technology advisor. Logically, we know about Oracle software best, how it's built, the product direction, and the best way to run it, and customers know their business. By partnering with Oracle to put the business imperatives together with the technology, customers can achieve a competitive edge, operating efficiencies, and scale at the pace they need to win."

Insourcing the Competitive Advantage

"I would say the big lesson here is don't underestimate complexity," says Davis. Oracle On Demand gave Genworth the systems it needed on a flexible basis, but it didn't eliminate the ongoing challenges of strategy and governance. Instead, it allowed Davis and his team to work on projects that support the rapidly changing financial services markets.

The University of Texas' Beath believes that the biggest mistake companies make when outsourcing is that they confuse the commodity part of technology with the value-added information. "Assuming that because mainframes or servers are commodities means that managing a data center or server farm is a commodity is wrong. It's a mistake to think that because the inputs are a commodity, that the processes should be outsourced. That's a logical error," she says. "The reason you outsource is that the service you want is an industry standard. That doesn't mean it's a commodity, but that other people want the same service."

At The Warranty Group, the high levels of service available from outsourcing made the company's sale possible. "There's definitely a fast pace over here," Miklusak says. "I think it's been one of the biggest challenges I've faced and one of the most satisfying ones too."

For Equifax, the reliability of the outsourced system meant that managers were willing to take important risks. "Our leader in Latin America said, 'If I don't get the deal off the Siebel report, it doesn't count—you don't get paid for it,'" Equifax' Partain says. He was able to support that requirement, he emphasizes, because he knew the system worked. And that level of commitment paid off for the company. "Our business that has had the highest sales consistently has been our Latin America business. They're beating their forecast consistently. Having a much more automated process around their efforts and the fact that they were the leaders in growth in our company, I don't think it's a coincidence," he says. "That leader is now not just responsible for Latin America but for all of our international businesses."